Stan Collender's Capital Gains and Games

Boehner Debt Ceiling Statement Wasn’t Surprising; Might Have Been A Huge Miscalculation

Stan Collender — Wed, 16 May 2012 15:18:51 +0000

No one should have been surprised that House Speaker John Boehner yesterday said that he was going to go to war this fall with the White House over the debt ceiling.

Boehner simply doesn’t have the freedom from the House Republican caucus to move away from that extreme/take-no-prisoners position at this point in the year. Had he in any way indicated five+ months before the election and 7 months before not raising the debt ceiling will become a critical problem that he was willing to avoid a fight (let alone use the word “compromise’), Boehner would have been immediately slapped down by other House and Senate Republicans and had one or more GOP members announce that they were going to oppose him for Speaker.

Boehner had no choice and his statement on the debt ceiling was totally predictable.

However valuable Boehner’s hard line was with the base, it’s hard to imagine that his position will help the GOP in any way with the independent voters they will need to be successful in November. His statement and hard line position will remind independents of what they felt last August when, in the wake of the cliffhanger ending, the approval rating for Congress fell to single digits.

Bottom line: This simply was a play by Boehner to keep his job and should not be assumed to be an accurate prediction of what’s to come on the budget in the lame duck session.

Last Week's House "Reconciliation" Bill Was A Hoax

Stan Collender — Tue, 15 May 2012 09:16:29 +0000

My column from today's Roll Call explains why the "reconciliation" bill the House passed last week that the GOP leadership was so proud of and wanted everyone to think was a major accomplishment in reality was a scam, sham, and as close to a budget hoax as you can get.

House ‘Reconciliation’ Bill Was Anything But

Unless the House decides to consider another makes-no-sense-and-has-no-effect bill such as the “reconciliation” bill it passed last week, the fiscal 2013 budget process essentially is over and done with until after Americans go to the polls in November.

Yes, action on appropriations will be needed by the time the fiscal year begins Oct. 1. But even if there is some spending Sturm und Drang, the most likely outcome at that point will be a bipartisan shrug of the shoulders and a short-term continuing resolution that avoids a government shutdown before the election.
That will keep federal departments and agencies funded through part or all of the lame-duck session of Congress that now seems 100 percent inevitable.

So why did the House last week debate and pass the Sequester Replacement Reconciliation Act? Not only is the name a complete misnomer, but the bill won’t accomplish anything.

First, it has nothing to do with reconciliation. Reconciliation can only occur pursuant to instructions in a budget resolution conference report approved by both chambers of Congress. With the Senate unwilling to consider a budget resolution this year, there will be no such agreement.

In addition, reconciliation is the procedure the Congressional Budget Act allows to be used to make changes in mandatory spending and revenues. The House-passed bill focuses on appropriations, and those changes are supposed to be implemented in a different way.

That makes use of the reconciliation label and the implication of the bill’s importance both grossly incorrect and substantially overstated to the point of being all hype and spin. It would have been just as accurate to call what the House passed a constitutional amendment as it was to refer to it as reconciliation.

Second, even if the bill were enacted, it wouldn’t actually replace the sequester — the spending cut that will occur Jan. 2 because the anything-but-super committee failed to agree on a deficit reduction plan. It might be an alternative, but it’s definitely not a replacement.

There are two theories as to why the Republican leadership moved ahead with this bill last week even though it wasn’t what it claimed to be and will never be enacted.

The practical theory is that the House passing the “reconciliation” bill in 2012 will make it much easier for the Senate to move quickly in 2013 to do the same if Republicans are in the majority in the next Congress.

That’s procedurally incorrect and, therefore, makes no sense. As with all other legislation considered but not enacted, this bill will die when Congress adjourns at the end of the year. The new Senate won’t be able to expedite the legislative process by simply taking up what the House previously adopted because, technically, the House will not have yet adopted anything and will have to do so again.

In fact, to do reconciliation next year, the House and Senate will both have to agree on a budget resolution conference report, pass their own reconciliation bills, resolve their differences on those bills and then each agree to the compromise — and that assumes they won’t have to deal with a presidential veto.

That’s a process that won’t be expedited by what the House did last week. Indeed, the most likely timetable for that happening is for both chambers to include a 2013 budget resolution with reconciliation instructions for that fiscal year when they debate and pass a 2014 budget resolution, and that most likely won’t start to happen until April or May at the earliest.

That means that, assuming a 2014 budget resolution is adopted next year, reconciliation for 2013 wouldn’t occur until around June 2013 — five months after the Jan. 2 sequester will have gone into effect.

The other theory about why the Republican leadership insisted that the misnamed, misleading and do-nothing bill be debated and passed is that it’s all political. Passing the bill gave the House GOP another way to show its commitment to cutting spending and demonstrated a desire not to go ahead with the Pentagon spending reductions that are part of the sequester.

In other words, it was just an election-year ploy.

This makes far more sense. The bill the House voted on last week will be great for many GOP candidates on the campaign trail because it will allow them to talk about their willingness to cut domestic spending, not cut military spending and move ahead with the budget process.

But recognizing it’s a political effort is an admission that last week’s debate on the bill really has nothing to do with the federal budget debate. The “reconciliation” bill is the best indication yet that those efforts won’t restart until after Nov. 6.

And in other news: The Treasury last week reported that the federal government had a $59 billion surplus in April. Not only was the surplus larger than expected, it was also the mirror image of last April’s more than $40 billion deficit. No matter what the direction, an almost $100 billion turnaround in any month is news.

There was a time when an April surplus wouldn’t have been news. Most Americans pay their individual income taxes in April, and until the past few years, that made a surplus typical. That makes this April’s results noteworthy and worth watching. If it’s the start of a return to budget normality, the overall budget deficit could begin to be much lower compared with previous years.

This Is Why No One In Washington Wants To Talk About Fiscal Policy

Stan Collender — Mon, 14 May 2012 10:11:33 +0000

Even though it actually was relatively big news, it's not at all surprising that last week's announcement from the Treasury that there was a $59 billion surplus in April wasn't hyped in any way.

As I posted about last week, the better-than-expected $59 billion surplus was an almost $100 billion change from the $40 billion deficit recorded in April 2011. That's an astounding reversal.

What makes it even more astounding is that, although April always used to be a surplus month (that is, after all, when most Americans file and pay their individual income taxes) this was the first April surplus in four years. Although one month doesn't make a trend and shouldn't automatically be assumed to be a sign of what's ahead, the April surplus is noteworthy and definitely is worth watching.

So why didn't the April surplus generate more news?

1. The White House doesn't really want to talk about the deficit even when it would be able to talk about a surplus. Doing that would give the GOP a chance to respond on an issue the administration would prefer to avoid. The back-and-forth on a subject that is politically damaging would last through several news cycles.

2. Talking about a monthly surplus would likely generate criticism from many within the Democratic Party who believe that, given the still-tepid recovery, that's the wrong fiscal policy at this time.

3. Talking about a one-month surplus would almost certainly require that the White House, Treasury, or OMB discuss the projected the deficit for all of fiscal 2012. While that's likely to be $200 billion or more less than what was recorded for 2011, the deficit will still be close to $1 trillion and that would be hard to defend.

This is a little-understood part of the federal budget debate. Even if the 2012 deficit was half of what it was in 2011, and even if that reduction were applauded by Wall Street and the economic community, it would still be a painfully difficult political issue. In fact, long after the deficit has fallen to the point where most economists are comfortable with it, the political advantage will still be with those who criticize it.

George Constanza Budgeting

Stan Collender — Fri, 11 May 2012 09:41:32 +0000

You remember "Seinfeld," the hit NBC show that proudly was about nothing?

If the show was still on the air doing original programs (It's obviously still on the air everywhere all the time in reruns), two federal budget-related events from yesterday no doubt would have inspired the writers and been the fodder for future episodes.

The first was the consideration and passage in the House of what was called the "Sequester Replacement Reconciliation Act of 2012." The fact that the bill was adopted by the House means...wait for it...absolutely nothing because it has no chance whatsoever of being enacted. And in spite of its name, it's not a reconciliation bill and even if it were enacted it wouldn't completely replace the spending cut -- the sequester -- that is scheduled to take effect on January 2, 2013.

Other than that it's very meaningful.

For the record, the vote was 218-199 and all of the ayes were Republicans. The no votes included 16 Republicans and 183 Democrats.

Yesterday's second nothing budget event was the surprise announcement by the Treasury that the United States recorded a more than $59 billion surplus in April.

On the one hand, not only was the surplus larger than expected, it was also the mirror image of last April's more than $40 billion deficit so the results could be an indication that the budget situation is changing for the better. This was, after all, the first monthly surplus since September 2008, that is, in close to four years. So even if April used to always be a surplus month, the fact that it was again in 2012 is as noteworthy as when it didn't happen 2009, 2010 or 2011.

On the other hand, a one-time one-month surplus cannot be assumed to be the start of a trend. It may be, but at this point anyone who says that is doing more wishing and hoping than solid analysis.

More important, even after the April surplus the overall fiscal 2012 deficit is projected to be close to $1 trillion and, therefore, is still a political problem.

In other words, it actually changes nothing.

The Cliff: Coming Soon To A Political Theater Near You

Stan Collender — Tue, 08 May 2012 10:58:01 +0000

As I explain in my column from today's Roll Call, if you're not yet angry about The Cliff, you soon will be and what's taking you so long?

Coming to a Political Theater Near You: The Cliff

I only realized how angry I was about the cliff several days ago when I started to outline this week’s Fiscal Fitness. By the time I sat down to write it several days later, I was fit to be tied and needed to avoid anything that included caffeine.

You know what I mean by the “Fiscal Cliff” — Federal Reserve Chairman Ben Bernanke’s ultimate Fed-speak for the budget apocalypse that could occur between Dec. 31 and Jan. 2. That’s when a series of existing federal-budget-related policies will expire and others will be triggered that could result in an economic calamity.

Actually, “could occur” masks the real situation. The truth is that the cliff is already scheduled to happen. It may be a crisis, but it won’t be unexpected: We know what’s ahead, the precise moment when it will occur and how it will happen.

The cliff includes substantial tax increases on most Americans and significant military and domestic spending cuts that will affect most individuals and almost every business. It also includes another debt ceiling cliffhanger that, if nothing else, could further convince lenders and rating agencies that, for political reasons, the United States is not as good a credit risk today as it has been in the past.

All of this will be happening during the most unstable political environment that could possibly exist — a lame-duck session of Congress — when the work of Representatives and Senators not returning to Washington, D.C., the following year typically is, to be charitable, less reliable. And that’s if they and their staffs, who all have to find new jobs, move or otherwise deal with their soon-to-be-dramatically-changed lives, show up at all.

The cliff has the potential to create some of the most incredible political theater this country has ever seen. It will include drama, Shakespearian-like tragedy, suspense and farce. If it happens, it will involve the murder of enough jobs that it will look like a whole season of “Dexter.” It also will rival HBO’s “Game of Thrones” for twists and turns about who is on top and who is aligned with whom. You’ll laugh, you’ll cry, and the suspense will be intense.

But no matter how great the political theater might be, the cliff really needs to be called what it actually is: pathetic policymaking.

Actually, calling it policymaking gives it way too much credit.

The cliff is the result of a steady series of policy breakdowns over the past few years, especially the multiple failed direct negotiations between the most senior executives in the government including the president, vice president, Speaker, and House and Senate Majority and Minority Leaders. It came after the Senate was unable to get enough votes to create its own budget commission and the presidential commission created in response didn’t get adequate support for a plan to move the process forward. Add in the acknowledged failure of the anything-but-super committee and the inability of the Senate’s “gang of six” to generate enough interest in what it wanted to do, and it becomes obvious that policies have been avoided rather than made.

I get it: The decisions on everything having to do with the federal budget are difficult and, if you’re running for re-election, best left until after Election Day. I also understand that, if you’re a Member of Congress, there’s a politically strategic value to wait until you know which party will be in charge of the House and Senate and the size of the majority before making a decision on how to proceed on the various revenue, spending, deficit and debt questions that have been left hanging. After all, you might get more of what you want after the election than before.

But I also understand more than ever before about how angry many outside the Beltway seem to be about the elections somehow being more important than the economy. Over the past two weeks I have spoken to five different groups that cut across the income and political spectrums, and all have expressed not just dissatisfaction but something close to total disdain about this situation. More than six months before it begins, the cliff is causing a great deal of heartburn.

My anger may be even greater than theirs because I don’t see there being enough time, votes, consensus or willingness to compromise for cliff-related agreements to be reached, translated into legislation, debated and enacted.
In addition, everything that has to be determined during the cliff is related in some way to almost everything else that has to be considered. For example, a decision on the sequester or providing 2012 alternative minimum tax relief, let alone on extending the tax cuts, will change the projected deficit and, therefore, the amount the debt ceiling has to be raised. That means that it really won’t be possible for anything to be decided until everything is decided.

It also means that the most likely outcome of the cliff will be “The Cliff 2: The Budget Strikes Back” coming to a theater near you at some point next year. The hype, complete with full-page ads, online commercials and previews in theaters, will begin to appear this fall.

Rosenthal Cartoon

Dan Rosenthal — Tue, 08 May 2012 01:22:41 +0000

Paul Ryan's Latest Budget Bill Shows He's Still A Coward

Stan Collender — Mon, 07 May 2012 10:00:52 +0000

After a week off for...well, it's not really clear why other than to campaign Congress took the first week in May off...the House and Senate are returning to Washington this week and immediately getting back to their old tricks when it comes to the federal budget -- doing something that is purely symbolic, has no chance whatsoever of being enacted, and is bad policy to boot. Other than that, it's a great idea.

As far as we know now (Would anyone be surprised if something else popped up?), the most egregiously silly thing that's going to happen on the budget this week is the House's consideration of what House Budget Committee Chairman Paul Ryan (R-WI) is calling a "reconciliation" bill.

This bill would cut $78 billion in spending in fiscal 2013 and cancel the $90 billion spending cut that was triggered when the anything-but-super-committee failed to agree on a deficit reduction plan late last November. The bill also includes an additional $180 billion in spending cuts over the next nine years.

Several things need to be noted about this bill.

First, it has no chance whatsoever of being enacted. The Senate isn't going to consider it, the president would veto it if it managed to pass the Senate, and the votes absolutely don't exist to override the veto. The time spent debating this bill is a total waste of time and taxpayer dollars.

Second, although it's being portrayed as a spending cut, the truth is that the bill would reduce spending LESS than will happen if the January spending cuts are allowed to go into effect as planned. It's not hard to imagine what Ryan and his GOP colleagues would say if this was an effort by Democrats to reduce the size of that spending cut.

Third, technically this is not a reconciliation bill. Reconciliation is the process Congress uses to enforce the revenue and mandatory spending assumptions in a budget resolution conference agreement between the House and Senate. That means (1) there has to be a budget resolution conference agreement, which there isn't this year and (2) the bill is only allowed to include provisions that relate to taxes and mandatory spending programs, and this one doesn't.

Fourth, this is a huge missed opportunity and yet another example of how, in spite of all of the spin, Ryan is a budget coward rather than a leader. A serious effort to develop a compromise with House Democrats could easily have produced a bill that would have passed with bipartisan support and moved the budget debate forward. That would have annoyed some in the Republican and generated some opposition within the House GOP caucus, but the coalition would have passed the bill overwhelmingly. Instead of doing that, Ryan again cowardly decided to pander to the Republican base and in the process prevent the budget debate from moving forward the rest of the year.

Where Has CG&G Been?

Stan Collender — Mon, 07 May 2012 09:27:01 +0000

Thanks for your notes. I'm fine.

I unexpectedly ended up taking two weeks off from CG&G when a combination of planned and unplanned business travel combined with a reaction to the very bad allergy season we're having in the Washington, D.C. area this year to limit the time and energy I could devote to most things. The good news is that the travel is over and the coughing has (mostly) stopped enough for me to get back to work.

The good news is that, intended or not, the brief hiatus gave me a chance to work with Troy on several plans for CG&G that we've been hatching for a while. You'll start to see them shortly.

I truly appreciate the concerns. Now, back to the show.

Rosenthal Cartoon

Dan Rosenthal — Tue, 01 May 2012 18:57:00 +0000

The Budget Debate Should Not Be Fiscal Instant Messaging

Stan Collender — Tue, 24 Apr 2012 10:40:45 +0000

My column from this morning's Roll Call explains why we'd all be much better off if Congress would use the federal budget debate to do something more than send messages. What else? How about a novel idea like policymaking?

Budget Process Is Not Fiscal Instant Messaging

By Stan Collender
Roll Call Contributing Writer
April 24, 2012, Midnight

One of the things that always impressed me about the earliest days of the Congressional budget process — circa 1977-80 — was how quickly Members of Congress learned to use it to send messages.

When it became clear that the House and Senate Budget committees had little real power (after all, they didn’t have the authority to increase or decrease spending or taxes or change authorizations) and when it dawned on everyone that the process was advisory rather than mandatory, the budget resolutions, the reports that accompanied the budget resolutions and the budget-related floor debates all became ways to tell something to someone.

In some cases, the messages were direct and to the point, as when a committee was told what had been assumed for a specific program or provision within its jurisdiction. In most cases, however, the message was subtler, with the budget resolution based on spending or revenue changes that were reflected in the topline numbers rather than explained in report language or in a colloquy on the floor.

Three things have changed in the decades since the budget process’s message-sending capabilities started to be understood. First, instead of primarily being used as an internal memo to talk to others on Capitol Hill, Members of Congress today use it to reach those outside the Beltway. Second, the messages that once primarily were about Budget Committee preferences on how programs and provisions should be changed are today about electoral maneuvering. Third, the subtle messaging from early days has been replaced by shameless political efforts.

That’s the only conclusion that’s possible after watching how the budget process became the political equivalent of Twitter last week. Economic policymaking — that is, what the budget process is supposed to do — was completely replaced with instant-message-like efforts that definitely were not worth the time, taxpayer money or energy it took to send the messages.

The House, which in recent years has already done enough silly things on the budget to merit a lifetime achievement award, took it one step further last week by moving ahead with reconciliation based on the instructions included in the budget resolution it passed late last month.
That may not seem to be a bad thing until you remember that reconciliation is the process that, according to the Congressional Budget Act, is used only to enforce a budget resolution conference agreement and not what either the House or Senate wants to do on its own. With the Senate already indicating that it has no plans to do a budget resolution this year, there’s no chance that there will be a budget resolution conference report and, therefore, no chance that reconciliation will occur.

That makes everything the House does to comply with the reconciliation instructions in its own budget resolution nothing more than a messaging effort by the Republican majority to tell the GOP base this is why it deserves to be re-elected. Never mind that what it passed has no chance of being enacted.

Meanwhile, Senate Budget Chairman Kent Conrad (D-N.D.) last week moved ahead (albeit without votes or amendments) with plans to consider a budget resolution that he proudly proclaimed was based on the recommendations included by the Bowles-Simpson commission in its final report.

Here again, that might not appear to be such a bad thing until you realize that the Bowles-Simpson commission didn’t actually produce a report. In fact, what its cult-like supporters like to call the Bowles-Simpson report is nothing more than what the commission’s two co-chairmen proposed: Their recommendation was never voted on because they didn’t have enough support from other commission members to keep the process going.

But that’s not all. The House overwhelmingly rejected the Bowles-Simpson commission last month when something resembling what the co-chairmen proposed was offered as a substitute for the budget resolution put together by Budget Chairman Paul Ryan (R-Wis.).

Not only was Ryan one of the Bowles-Simpson commission members whose opposition doomed the plan when it first was recommended by the co-chairmen, he also rejected using it as the basis for what he recommended in his own committee and then voted against the Bowles-Simpson amendment when it was offered on the floor. Ryan would lead the House conferees if there were a budget resolution conference this year, so his repeated opposition means that any plan called Bowles-Simpson almost certainly is doomed before it begins. Add the embarrassing bipartisan opposition to the plan when the House debated it last month, and the possibility that it could succeed in the current environment is zero.

That makes the message — Bowles-Simpson is worthwhile, and we support it — doubly curious. The Bowles-Simpson recommendation is a thoroughly discredited concept. But, and far more importantly, in the same way that the House reconciliation efforts based on its own budget resolution have no chance of being enacted, a Bowles-Simpson-based budget resolution coming from the Senate also will go nowhere.

There are better ways to send the federal budget-related messages that need to be sent. If the House (or Senate) wants to move forward, why not actually send the other body a real message by asking it to meet to see if something can be worked out?

The alternative of just passing or considering legislation that will never become law is the type of message that will never be received.